1. CHAPTER 2
The Recording Process
ASSIGNMENT CLASSIFICATION TABLE
Brief A B
Study Objectives
Question
s
Exercise
s Do It!
Exercis
es
Proble
ms
Proble
ms
1.
Explain what an
account 1 1
is and how it helps in
the
recording process.
2.
Define debits and
credits
2, 3, 4, 5, 1, 2, 5 1 2, 4, 6, 1A, 2A, 1B, 2B,
and explain their use in 6, 7, 8, 9, 7, 14 3A, 5A 3B, 5B
recording business 14, 21
transactions.
3.
Identify the basic steps
in 10, 19 4 6, 7
the recording process.
4.
Explain what a journal
is
11, 12, 13, 3, 6 2 3, 5, 6, 7 1A, 2A, 1B, 2B,
and how it helps in the 14, 16 10, 11,
12
3A, 5A 3B, 5B
recording process.
5.
Explain what a ledger is 17 8
and how it helps in the
recording process.
6.
Explain what posting is 15 7, 8 3 9, 12
2A, 3A,
5A
2B, 3B,
5B
and how it helps in the
recording process.
7.
Prepare a trial balance 18, 20 9, 10 4 9, 10, 11, 2A, 3A, 2B, 3B,
and explain its
purposes.
13, 14,
15 4A, 5A 4B, 5B
6. Co
2-
5
Correl
ation
Chart
betwe
en
Bloom’
s
Taxon
omy,
Study
Object
ives
and
End-of-
Chapt
er
Exerci
ses
and
Proble
ms
Study 1.
Explain is and how recording 2.
Define and
explain recording
business 3.
Identify the recording 4 Explain
7. . and
BL
OO
M’
how it helps in the
recording
process.
5.
S
T
AX
ON
Explain what a ledger is
and
how it helps in the
recording
process.
6.
O
MY
Explain what posting is
and
how it helps in the
recording
process.
7.
T
ABL
Prepare a trial balance
and
E
explain its purposes.
Broadening Your Perspective
11. SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 2-1
(a) (b) (c)
Debit Credit
Norma
l
Effect Effect
Balanc
e
1.
Accounts Payable
Decrea
se
Increas
e
Cre
dit
2.
Advertising Expense
Increa
se
Decrea
se
Debi
t
3.
Service Revenue
Decrea
se
Increas
e
Cre
dit
4.
Accounts Receivable
Increa
se
Decrea
se
Debi
t
5.
Share Capital—Ordinary
Decrea
se
Increas
e
Cre
dit
6.
Dividends
Increa
se
Decrea
se
Debi
t
BRIEF EXERCISE 2-2
Account Debited Account Credited
June 1 Cash
Share Capital—
Ordinary
2 Equipment Accounts Payable
3 Rent Expense Cash
Accounts
12
Receivable Service Revenue
BRIEF EXERCISE 2-3
June 1 Cash 5,000
Share Capital—Ordinary 5,000
2 Equipment 900
Accounts Payable 900
3 Rent Expense 800
Cash 800
20. DO IT! 2-2
Each transaction that is recorded is entered in the general journal.
The three activities would be recorded as follows:
1. Cash 8,000
Share Capital—Ordinary 8,000
2. Photography Supplies 1,100
Cash 400
Accounts Payable 700
3. No entry because no transaction has occurred.
DO IT! 2-3
Ca
sh
4/
1
1,60
0
4/1
6
60
0
4/
3
3,40
0
4/2
0
30
0
4/
30
4,10
0
DO IT! 2-4
BOARDIN’ COMPANY
Trial
Balance
December 31, 2011
De
bit Credit
Cash.......................................................
.............................
R$
6,00
0
Accounts
Receivable ............................................
........
8,00
0
Supplies .................................................
...........................
5,00
0
Equipment ..............................................
..........................
80,0
00
Notes
Payable .................................................
................
R$
20,0
00
Accounts
Payable .................................................
.........
11,0
00
Salaries
Payable ................................................. 3,00
47. PROBLEM 2-2A (Continued)
Date
Account Titles and
Explanation
Re
f. Debit
Cred
it
May
31
Accounts Payable (€2,500 X
40%)............
20
1 1,000
Cash ......................................
................
10
1
1,0
00
(Paid creditor on
account)
(b)
Cash
No.
101
Date Explanation Ref.
De
bit
CreditBalan
ce
May
1 J1
25,00
0 25,000
7 J1 900 24,100
12 J1 3,500 27,600
17 J1 1,200 28,800
2,00
31 J1
0 26,800
31 J1
1,00
0 25,800
Accounts Receivable
No.
112
Date Explanation Ref.
De
bit
Credit
Balan
ce
May
11 J1 2,100 2,100
Suppli
es
No.
126
Date Explanation Ref.
De
bit
Credit
Balan
ce
May 3 J1 2,500 2,500
49. PROBLEM 2-2A
(Continued)
Share Capital—Ordinary
No.
311
Da
te Explanation Ref. Debit Credit
Balan
ce
Ma
y 1 J1 25,000 25,000
Service Revenue
No.
400
Da
te Explanation Ref. Debit Credit
Balan
ce
May1
1 J1 2,100 2,100
17 J1 1,200 3,300
Salaries Expense
No.
726
Da
te Explanation Ref. Debit Credit
Balan
ce
May 31 J1
2,00
0 2,000
Rent Expense
No.
729
Da
te Explanation Ref. Debit Credit
Balan
ce
Ma
y 7 J1 900 900
(c) JANE KENT ACCOUNTANT
Trial
Balance
May 31,
2011
Debi
t
Credi
t
51. PROBLEM 2-
3A
(a
)
&
(c
)
Cash
Balanc
e
(4)
(7)
Acco
unts
Rec
eiva
ble
Ba
l
an
ce
15
,0
00
(4)
14,0 00
(7) 9,
00
0
10,000
Parts
Invento
ry
Ba
l
an
ce
13
,0
00
4,0
00
(6)
13,000
Prepaid
Rent
Ba
lan
ce
3,
00
0
3,000
Shop
Equip
ment
Ba
lan
ce
21
,0
00
21,000
Acco
unts
Paya
ble
Bala nce
19 ,00 0
(2)
4,000
15,
00
0
8,
00
0
Sh
ar
e
Ca
pit
al—O
r
di
na
ry
Balan ce
30 ,00 0
30,
00
0
Retai
ned
Earni
ngs
Balan ce
11 ,00 0
11,
00
0
Dividend
s
3,0
00
3,000
Re
p
ai
r
Se
r
vi
ce
s
Re
v
en
61. PROBLEM 2-5A
(Continued)
Equipm
ent
No.
157
Da
te Explanation Ref. Debit Credit
Balan
ce
Ap
r. 1 Balance 6,000
Accounts Payable
No.
201
Da
te Explanation Ref. Debit Credit
Balan
ce
Ap
r. 1 Balance 2,000
10 J1 1,000 1,000
20 J1 1,000 2,000
Mortgage Payable
No.
275
Da
te Explanation Ref. Debit Credit
Balan
ce
Ap
r. 1 Balance 8,000
10 J1 2,000 6,000
Share Capital—Ordinary
No.
311
Da
te Explanation Ref. Debit Credit
Balan
ce
Ap
r. 1 Balance 20,000
Admission Revenue
No.
405
Da
te Explanation Ref. Debit Credit
Balan
ce
Ap 9 J1 2,800 2,800
63. PROBLEM 2-5A (Continued)
Advertising Expense
No.
610
Da
te Explanation
Re
f. Debit
Credit
Balan
ce
Apr.
12 J1 500 500
Film Rental Expense
No.
632
Da
te Explanation
Re
f. Debit
Credit
Balan
ce
Ap
r. 2 J1 800 800
20
J1 1,000 1,800
Salaries Expense
No.
726
Da
te Explanation
Re
f. Debit
Credit
Balan
ce
Apr.
29 J1 2,000 2,000
(b
) Da
Account Titles and
te
Explanation Ref. Debit Credit
J1
Ap
r. 2
Film Rental
Expense ............................... 632 800
Cash .................................
.................. 101 800
(Paid film
rental)
3 No entry—not a transaction.
9
Cash........................................
...................... 101 2,800
Admission 405 2,800
74. PROBLEM 2-2B (Continued)
Da
te
Account Titles and
Explanation
Re
f
. Debits
Cred
it
Apr.
30
Acco
unts
Paya
ble .... .. .. ........ .. .. ....... .. ....... 201 1,600
Cas
h
...............................
101 1,600
75. .....................
(Paid Smile Company
on
acc
ount) (b)
Cash No. 101
Date
Expl
anati
on Ref. Debit
Cre
dit Balance
Apr. 1 J1
40,00
0
40,00
0
2 J1
1,0
00
39,00
0
11 J1 1,000
40,00
0
20 J1 2,100
42,10
0
77. PROBLEM 2-2B (Continued)
Share Capital—
Ordinary
No.
311
Da
t
e Explanation Ref. Debit
Credi
t
Balan
ce
Ap
r
. 1 J1
40,0
00 40,000
Service Revenue
No.
400
Da
t
e Explanation Ref. Debit
Credi
t
Balan
ce
Apr. 10 J1
5,10
0 5,100
20
J1
2,10
0 7,200
Salaries Expense
No.
726
Da
t
e Explanation Ref. Debit
Credi
t
Balan
ce
Apr. 30 J1 2,400 2,400
Rent Expense
No.
729
Da
t
e Explanation Ref. Debit
Credi
t
Balanc
e
Ap
r
. 2 J1 1,000 1,000
(c
)
MARIA JUAREZ,
DENTIST
Trial Balance
April 30, 2011
88. PROBLEM 2-5B
(Continued)
Accounts Payable
No.
201
Da
te Explanation Ref. Debit Credit
Balan
ce
Ma
r. 1 Balance 7,000
2 J1 2,000 9,000
10 J1 4,100 4,900
Share Capital—Ordinary
No.
311
Da
te Explanation Ref. Debit Credit
Balanc
e
Ma
r. 1 Balance 46,000
Admission Revenue
No.
405
Da
te Explanation Ref. Debit Credit
Balanc
e
Ma
r. 9 J1 4,000 4,000
20 J1 5,000 9,000
31 J1 9,000 18,000
Concession Revenue
No.
406
Da
te Explanation Ref. Debit Credit
Balanc
e
Mar.3
1 J1 900 900
Advertising Expense
No.
610
Da
te Explanation Ref. Debit Credit
Balanc
e
99. BYP 2-5 COMMUNICATION ACTIVITY
Date: May 25, 2010
To: Accounting Instructor
From: Student
In the first transaction, bills totaling $6,000 were sent to customers
for services rendered. Therefore, the asset Accounts Receivable is
increased $6,000 and the revenue Service Revenue is increased
$6,000. Debits increase assets and credits increase revenues, so
the journal entry is:
Accounts
Receivable.................................................................
....... 6,000
Service
Revenue ...............................................................
........ 6,000
(Bill customers for services provided)
The $6,000 amount is then posted to the debit side of the general
ledger account Accounts Receivable and to the credit side of the
general ledger account Service Revenue.
In the second transaction, $2,000 was paid in salaries to employees.
Therefore, the expense Salaries Expense is increased $2,000 and
the asset Cash is decreased $2,000. Debits increase expenses and
credits decrease assets, so the journal entry is:
Salaries
Expense ....................................................................
........... 2,000
Cash ......................................................................
........................ 2,000
(Salaries paid)
The $2,000 amount is then posted to the debit side of the general
ledger account Salaries Expense and to the credit side of the
general ledger account Cash.
101. BYP 2-6 ETHICS CASE
(1) The stakeholders in this situation are:
Mary Jansen, assistant chief accountant.
Users of the company’s financial
statements. The Casey Company.
(2) By adding $1,000 to the Equipment account, that account total
is inten-tionally misstated. By not locating the error causing the
imbalance, some other account may also be misstated by
$1,000. If the amount of $1,000 is determined to be immaterial,
and the intent is not to commit fraud (cover up an embezzlement
or other misappropriation of assets), Mary’s action might not be
considered unethical in the preparation of interim financial
statements. However, if Mary is violating a company accounting
policy by her action, then she is acting unethically.
(3) Mary’s alternatives are:
1. Miss the deadline but find the error causing the imbalance.
2. Tell her supervisor of the imbalance and suffer the
consequences.
3. Do as she did and locate the error later, making the
adjustment in the next quarter.